- Tesla CEO Elon Musk thinks that fully autonomous Tesla vehicles will lead consumers to conclude that it’s “financially insane” to buy a vehicle from somebody else.
- But even if Musk were right, Tesla isn’t remotely capable of satisfying even US automobile demand.
- The more Tesla struggles to be a major automaker, the more Musk is working to brand the company as a Silicon Valley tech firm.
- Visit Business Insider’s homepage for more stories.
During the course of a deeply technical presentation for investors about Tesla’s full-self-driving technology on Monday, CEO Elon Musk boldly declared that it would soon be “financially insane” for anyone to buy a car that isn’t a Tesla. He added that if you don’t buy a Tesla that could drive itself, it would be like opting for a horse back when the automobile first arrived over a hundred years ago.
Musk is the greatest car salesman who has ever lived, and Monday’s event was pure salesmanship. It’s unclear whether Tesla can get even remotely close to its now-stated Muskian goal of putting a million robotaxi Tesla’s on the road, challenging the likes of Waymo and GM’s Cruise.
What is clear, however, is that even if you saw the light and decided that Musk is right about Teslas and horses, the carmaker has nowhere near the ability to satisfy the demand that would logically follow.
In the US alone, over 17 million passenger vehicles were sold last year (that number excludes everything else that’s used for over-the-road transportation, freight, hauling, deliveries, and so on). Tesla sold about 250,000 of them. Impressive, but a small percentage of the total. Tesla operates just one factory, with a theoretical capacity of about 450,000 vehicles annually.
Even if Tesla doubled its 2018 output, it would still just be scratching the surface of US market demand. Even if Musk and Tesla were able to convince every single future US car customer to buy one of the company’s vehicles, it would take decades to create new manufacturing capacity, or convert existing capacity.
Musk takes the outlandish route
But this is the sort of outlandish statement Silicon Valley laps up. Invariably, tech denizens cite the iPhone, which took over the smartphone market after its introduction and vanquished, in short order, Blackberry and Nokia. Musk has never really been comfortable with the dynamics of the traditional auto industry, so he constantly seeks to keep Tesla on a separate plane, promoting it as a tech firm and a creation of Silicon Valley rather than a West Coast outpost of Detroit.
If, as a consumer, your only choices were Tesla and the horses everybody else is selling, you’d be in a pickle. Ultimately, you’d probably be OK with the equestrian option. At least you’d have a car. No, it wouldn’t be a Tesla and it might not be able to drive itself – but would you care?
Silicon Valley and Tesla are rightly pursuing self-driving tech because it should be safer. But both are also ignoring why most people buy or lease a car. It’s because they want quick, affordable, and convenient personal transportation. The auto industry has capably served this demand for over a century.
If I want a car, I can go and buy one for about $US20,000 and drive it home in an afternoon. There’s nothing captivating or futuristic about this, and I can’t unleash my self-driving Honda to make extra money for me when I’m not driving it, but it gets the job done.
The upshot here is that it’s OK to give Tesla and Musk the benefit of the doubt when it comes to the self-driving dream. That’s where the serious action is these days, so it’s understandable that Musk is talking it up. Plus, Tesla’s electric-car story has been running since before the financial crisis – and it isn’t selling like it used to.
It’s not OK, however, to take seriously all of Musk’s grand pronouncements about cars and what consumers want. In other words, yes, there are times when even Musk is completely misguided.
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